I.

Introducion:
Cost classification is an important element in management accounting, and it also
provides important information for inventory valuation, selling price determination, and
profit analysis. However, there is a difference in product cost and time cost between
marginal costing and absorption costing systems but some people don't notice this
difference and thus cause confusion. and mistakes in profit analysis. Through this essay, I
will analyze and find evidence to support the claim that equating production costs with
product costs and non-manufacturing costs with period costs can lead to errors in profit
analysis.
II.
1. Định nghĩa
Absorption costing Marginal costing
Product cost includes both variable and includes only variable
fixed manufacturing costs, manufacturing costs, such
such as direct materials, as direct materials, direct
direct labor, variable labor, and variable
overheads, and fixed overheads.
overheads, which are
absorbed into the cost of
the product based on a
predetermined overhead
absorption rate.
Period cost includes non- includes non-
manufacturing costs, such manufacturing costs, such
as selling and as selling and
administrative expenses, administrative expenses,
which are treated as and fixed manufacturing
period costs and are overheads, which are
expensed in the period in treated as period costs and
which they are incurred. are expensed in the period
in which they are
incurred.